The Hanover Insurance Group has agreed to sell Chaucer, its Lloyd's-focused international specialty business, to China Reinsurance (China Re) for total proceeds of $950m.
The transaction will include $865m in cash and $85m in pre-signing dividend from Chaucer, which will be received in the second quarter of this year, said The Hanover.
Chaucer is a specialist insurance business, underwriting risks at Lloyd’s. It deploys specialist underwriters in all major insurance and reinsurance classes, including global marine, energy, casualty, property and aviation.
Based in London, Chaucer has operations in Buenos Aires, Copenhagen, Houston and Singapore.
The Hanover president and CEO John Roche said: “Our decision to sell Chaucer followed an extensive strategic review and careful consideration.
“This transaction will enable us to build on the growing momentum in our domestic property and casualty businesses, as we continue to advance our long-term strategy and deliver even stronger shareholder returns.”
Out of the $865m, $820m is the initial payable amount at closing and a contingent amount of $45m will be held in escrow, which might be adjusted for any catastrophe losses are incurred this year.
Subject to regulatory approvals, the transaction is expected to be closed later this year or in the first quarter of next year. Chaucer’s equity on as of this June ending was $520m with a net of $73.2m of goodwill and intangible assets.
The total consideration is 1.66 times Chaucer’s tangible equity and it is structured in such a way that the risks and rewards of Chaucer’s business from this April until closing will be transferred to China Re.
Roche added: “We will continue to invest in and execute our strategy to be the carrier of choice for our agent partners and their customers. This includes accelerated expansion of our specialized capabilities in commercial lines businesses as well as continued growth and penetration in the personal lines and small commercial sectors.”
Goldman Sachs & Co acted as the financial advisor for The Hanover, while Debevoise & Plimpton provided the legal advice.